Calculating Pre-Accident Income When Considering Self-Employment Losses

In the LAT reconsideration decision released on June 5, 2019, Aviva Insurance Canada v. W.D.W. (17-005894/AABS), it was determined that the Tribunal made an error in law in its calculation of the quantum of the claimant’s income replacement benefits (“IRBs”) payable in its initial decision dated May 4, 2018 (“Initial Decision”).

Prior to the accident, the claimant was self-employed operating a farm and a corporation.  The farm reported income of $52,995.00 on the claimant’s personal income tax return and the corporation reported losses of $50,054.58 during the last fiscal year ended before the accident.

The Initial Decision did not deduct the corporate losses incurred by the claimant from his pre-accident income earned for purposes of determining the quantum of his IRBs.  The Initial Decision also deducted the claimant’s post-accident income earned from 70% of his gross weekly pre-accident income earned prior to applying the policy limit.

As a result of the above, the Initial Decision determined the claimant’s IRBs to be $400.00 per week.

However, Section 7(2)(1)(i) of the SABS determines the “weekly base amount” for IRB purposes to be 70% of employment and self-employment income that exceeds weekly loss from self-employment.  Therefore, both self-employment income and losses from self-employment (including a closely held corporation) are to be considered when calculating IRBs payable.

Similarly, Section 7 of the SABS outlines that 70% of post-accident income is to be deducted from the lesser of:  the “weekly base amount” less collateral benefits received, and the policy limit of $400 per week.

The Initial Decision erred in not deducting the corporate losses incurred by the claimant from his pre-accident income earned and deducting post-accident income from his weekly base amount prior to applying the policy limit.

Considering the above, the Tribunal granted the request for reconsideration and revised the calculation of the claimant’s IRBs payable to be $Nil.  Accordingly, the claimant was required to repay the amount of IRBs received in error from the insurer.

Read the reconsideration decision in full detail here:

Aviva Insurance Canada v. 17-005894, 2019 CanLII 63360 (ON LAT)

Read the initial decision in full detail here:

17-005894 v WDW, 2018 CanLII 81989 (ON LAT) decision